The message that greets would-be punters on the BetonSports website is short and to the point: "In light of court papers filed in the United States, the company has temporarily suspended this facility pending its ability to assess its full position. During this period no financial or wagering transactions can be executed."

The matter-of-fact language masks the dramatic fallout surrounding the arrest of David Carruthers, the chief executive of the London-listed online gambling company, who is languishing in a Fort Worth jail. BetonSports has suspended 85% of its business and nervous investors have knocked more than £900m off the sector's share values.

The unanswered question is whether the arrest of Carruthers - and a warrant for the arrest of Gary Kaplan, the founder of BetonSports - is a targeted operation by the Department of Justice or the precursor of a US-wide purge on gambling.

Carruthers, arrested a fortnight ago while en route from London to the company's base in Costa Rica, is among 11 people and four companies charged with violations of the US Wire Act, which outlaws the placing of bets on sporting events via the telephone. The indictment refers to "illegal wagering on professional and college football and basketball" and claims the company fraudulently took bets from US residents by phone and internet, failing to pay excise taxes.

Internet gambling on many sports is illegal in the US, so online betting companies have set up operations offshore. The Wire Act forbids interstate telephone betting; the Department of Justice says it applies to sports betting on the internet but not to casino games. The US Senate is considering a bill to extend the legislation to outlaw all online gambling.

BetonSports, which last year earned 98% of its income from the US, has removed Carruthers as chief executive. It said none of the founders, including Kaplan, has any role with the company. Since flotation and listing in 2004 BetonSports said it had operated in accordance with "the standards expected of a UK plc".

Carruthers is likely to be released on bail until his trial after entering not guilty pleas, but in St Louis on Monday the ban on the company taking bets was extended for two weeks by a federal judge.

Other UK-based online gambling companies have reacted with caution. Brian Wright, business manager of the Remote Gambling Association, which has 34 member companies including Ladbrokes, William Hill, PartyGaming and 888.com, said: "The Gambling Commission will be set up in the UK from September 2007 and will regulate online gaming and gambling. It is hoped that having such a regulator will make it more difficult for the US to see us as some kind of lawless land, run by the mob. Online gaming is far more secure, with audit trails that can be traced. It is a mainstream leisure activity - people play because they enjoy it. The US is a huge market, so its attitude is very frustrating. Our view is that we will have to see how this shakes out."

Most of the RGA's members avoid taking sporting bets in the US, looking instead to Europe and Asia. But Sportingbet plc, which has been listed on the Alternative Investment Market of the London Stock Exchange since 2001 and attracts 65% of its revenues from the US, is continuing to operate. A spokesman said: "It's business as usual for Sportingbet and its brands in the US - no change."

Sportingbet's share price is continuing to fall, despite its latest trading update this week showing forecast profits of £103m this year. About a third of its income comes from sporting wagers and the company is taking comfort from the fact that its director Mark Blandford flew out of Las Vegas after Carruthers' arrest and the outgoing chief executive Nigel Payne and finance director Andrew McIver flew to Mexico via Miami without intervention.

The UK government is also monitoring events across the Atlantic. Responding to an MP's suggestion that the UK was promoting itself as a global leader in online gambling, the culture secretary Tessa Jowell said she was gathering information about the steps being taken in the US and would be hosting an international conference on the issue at the end of October.

Wally Pyrah, a spokesman for Sporting Index, said: "The Americans seem to be acting like King Canute to stop the flood of gambling - it will be very interesting to see if they succeed."